A service price needs to cover more than the part and the time spent making the repair. It also needs to contribute toward running the business and leave room for profit.
To check whether your prices do that, start with three things: the cost of doing the work, your overhead, and how much work you can realistically complete.
1. Know what the job costs
Include the materials and labor needed to complete the job. Labor costs more than the hourly wage alone when you account for employer payroll taxes, benefits, and other employment costs.
If you’re a solo owner, include reasonable compensation for your own work. Otherwise, a job can appear profitable because you haven’t counted the person doing it.
Be consistent about where you count expenses. A cost included in your job labor calculation shouldn’t also be counted again in overhead.
2. Account for the business behind the repair
Your prices also need to support expenses such as insurance, software, office support, marketing, vehicles, and accounting.
These expenses still exist when a technician isn’t completing a paid repair. That’s why subtracting a part and an hour of wages from a selling price doesn’t tell you the whole story.
A break-even calculation considers both fixed and variable costs. Covering those costs gets you to break-even; profit requires revenue above that point.
3. Use realistic productive time
An eight-hour workday rarely means eight hours available to sell.
Travel, meetings, training, stocking, paperwork, and callbacks all take time. Your pricing assumptions need to reflect how your business actually operates.
Overestimating the amount of work you can sell can make a price look sufficient on paper while the business struggles to cover its expenses.
A simple example
Imagine a service job with:
$50 in parts and materials.
$100 in labor costs.
$100 allocated toward business overhead.
The estimated total cost is $250. At a $300 selling price, that leaves $50 before income taxes—assuming the costs and overhead allocation are accurate.
That $100 overhead allocation is only an illustration. Your allocation needs to come from your own expenses and realistic workload.
4. Compare the estimate with completed work
Choose a few common repairs and review what actually happened:
How long did the work take?
What materials were used?
Were there discounts or return visits?
Did the final selling price leave the contribution you expected?
Then check the overall results in your financial statements. One profitable repair doesn’t prove that the service department—or the business—is profitable.
Where to start
Pick three repairs you perform regularly. Compare your current prices with the costs and time required to deliver them.
You may discover that pricing needs attention. You may also find that purchasing costs, scheduling, productivity, or callbacks are affecting the result.
Want to work through your own pricing?
In the Price Your Work project, we work one-on-one using your business’s costs, labor assumptions, and pricing approach.
Start with a free discovery call. We’ll discuss what you want to improve and agree on the scope before you pay.
